For those countries with higher levels of potential renewable capacity, the creation of a new sectoral no-lose
mechanism generating emission reduction credits for sale to Annex I countries, with the proceeds being used to offset part of the additional cost of the feed-in tariff system, could be appropriate. For others there would need to be a more directly funded approach to paying for the additional costs to consumers of the tariff. The ultimate objective would be to provide bankable and long term stable support for the development of a local renewable energy market. The tariffs would bridge the gap between conventional power generation costs and those of renewable generation.
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Key parameters of FTSM
- Variable tariffs for different renewable energy technologies, depending on their costs and technology maturity, paid for 20 years.
- Payments based on actual generation in order to achieve properly maintained projects with high performance ratios.
- Payment of the 'additional costs' for renewable generation based on the German system, where the fixed tariff is paid minus the wholesale electricity price which all generators receive.
- Payment could include an element for infrastructure costs such as grid connection, grid re-enforcement or the development of a smart grid. A specific regulation needs to define when the payments for infrastructure costs are needed in order to achieve a timely market expansion of renewable power generation.
Key parameters in FTSM funds
- The mechanism will guarantee payment of the feed-in tariffs over a period of 20 years as long as the project is operated properly.
- The mechanism will receive annual income from emissions trading or from direct funding.
- The mechanism will pay feed-in tariffs annually only on the basis of generated electricity.
- Every FTSM project must have a professional maintenance company to ensure high availability.
- The grid operator must do its own monitoring and send generation data to the FTSM fund. Data from the project managers and grid operators will be compared regularly to check consistency.